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Iraq continues to face economic growth challenges due to the consistently lower oil prices and the fallout from the war with IS, the International Monetary Fund said after the end of its latest consultation on the state of affairs in OPEC’s number-two exporter.
The country booked a deficit of 14 percent last year, up from 12 percent for 2015, with foreign exchange reserves shrinking to US$45 billion last year from US$54 billion at the end of 2015 because of the drop in oil prices. At the same time, humanitarian and security spending increased, further burdening Baghdad’s efforts to return to growth.
Iraq is still heavily dependent on oil, as evidenced by the 11-percent increase in real GDP last year thanks to a 25-perent increase in oil production despite lower prices. However, the Fund said, this year GDP growth will be pressured by Iraq’s commitment to an output cut in line with OPEC’s strategy to rebalance the market.
This commitment may have weighed on Iraq but OPEC is still not happy with it. The country has been the focus of attention since the signing of the production cut deal last year as the most likely producer to go rogue and cheat on its quota, precisely because of its heavy dependence on oil revenues.
Earlier this week, the latest OPEC meeting, which aimed to check compliance among the members, revealed that Iraq’s compliance rate had fallen to 29 percent in June, at least according to IEA data as quoted by Bloomberg. Baghdad has rejected the information, saying the estimates that OPEC uses to measure compliance are inaccurate.
OPEC’s latest Monthly Oil Market Report showed that Iraq’s oil output fell by 33,100 bpd last month, to 4.468 million bpd from the previous month. Even so, the July daily production rate was higher than the figure for May, which stood at 4.446 million bpd.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.